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Experience:  Instructor and accountant. Master's degree in Accounting.
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# 1. In the month of September, Nixon Company sold 800 units

### Resolved Question:

1. In the month of September, Nixon Company sold 800 units of product. The average sales price was \$30. During the month, fixed costs were \$7,200 and variable costs were 60% of sales. (25 points)

Instructions
(a) Determine the contribution margin in dollars, per unit, and as a ratio.
(b) Using the contribution margin technique, compute the break-even point in dollars and in units.

2. It takes 3 pounds of direct materials to produce the Regular product and 5 pounds of direct materials to produce the Deluxe product. It is the company's policy to maintain an inventory of direct materials on hand at the end of each month equal to 30% of the next month's production needs for the Regular product and 20% of the next month's production needs for the Deluxe product. Direct materials inventory on hand at June 30 were 9,000 pounds for the Regular product and 15,000 pounds for the Deluxe product. The cost per pound of materials is \$5 Regular and \$7 Deluxe. (25 points)

Instructions
Prepare separate direct materials budgets for each product for the third quarter of 2010.

3. Coyle Company manufactured 6,000 units of a component part that is used in its product and incurred the following costs: (25 points)

Direct materials \$35,000
Direct labor 15,000
\$80,000

Another company has offered to sell the same component part to the company for \$12 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Coyle Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of \$14,000.

Instructions
Prepare an incremental analysis report for Coyle Company which can serve as informational input into this make or buy decision.

4. Mercer has three product lines in its retail stores: books, videos, and music. Results of the fourth quarter are presented below:
Books Music Videos Total
Units sold 1,000 2,000 2,000 5,000
Revenue \$22,000 \$40,000 \$23,000 \$85,000
Variable departmental costs 17,000 22,000 12,000 51,000
Direct fixed costs 1,000 3,000 2,000 6,000
Allocated fixed costs 7,000 7,000 7,000 21,000
Net income (loss) \$ (3,000) \$ 8,000 \$ 2,000 \$ 7,000

The allocated fixed costs are unavoidable. Demand of individual products are not affected by changes in other product lines.

Instructions
What will happen to profits if Mercer discontinues the Books product line?

5. Martinez Company h
Submitted: 7 years ago.
Category: Homework
Expert:  Steven, M.Acc. replied 7 years ago.
It seems like your question was cut off at the end. In the future, you can try posting five smaller questions, for example, at lower prices.
Customer: replied 7 years ago.
2. It takes 3 pounds of direct materials to produce the Regular product and 5 pounds of direct materials to produce the Deluxe product. It is the company's policy to maintain an inventory of direct materials on hand at the end of each month equal to 30% of the next month's production needs for the Regular product and 20% of the next month's production needs for the Deluxe product. Direct materials inventory on hand at June 30 were 9,000 pounds for the Regular product and 15,000 pounds for the Deluxe product. The cost per pound of materials is \$5 Regular and \$7 Deluxe. (25 points)

Instructions
Prepare separate direct materials budgets for each product for the third quarter of 2010.

3. Coyle Company manufactured 6,000 units of a component part that is used in its product and incurred the following costs: (25 points)

Direct materials \$35,000
Direct labor 15,000
\$80,000

Another company has offered to sell the same component part to the company for \$12 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Coyle Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of \$14,000.

Instructions
Prepare an incremental analysis report for Coyle Company which can serve as informational input into this make or buy decision.

4. Mercer has three product lines in its retail stores: books, videos, and music. Results of the fourth quarter are presented below:
Books Music Videos Total
Units sold 1,000 2,000 2,000 5,000
Revenue \$22,000 \$40,000 \$23,000 \$85,000
Variable departmental costs 17,000 22,000 12,000 51,000
Direct fixed costs 1,000 3,000 2,000 6,000
Allocated fixed costs 7,000 7,000 7,000 21,000
Net income (loss) \$ (3,000) \$ 8,000 \$ 2,000 \$ 7,000

The allocated fixed costs are unavoidable. Demand of individual products are not affected by changes in other product lines.

Instructions
What will happen to profits if Mercer discontinues the Books product line?

5. Martinez Company has money available for investment and is considering two projects each costing \$70,000. Each project has a useful life of 3 years and no salvage value. The investment cash flows follow:
Project A Project B
Year 1 \$ 8,000 \$28,000
Year 2 24,000 28,000
Year 3 52,000 28,000

Instructions
If 8% is an acceptable earnings rate, which project should be selected? Justify your response.

Expert:  Steven, M.Acc. replied 7 years ago.
When do you need this by?
Customer: replied 7 years ago.
Thursday??????
Jeannie
Expert:  Steven, M.Acc. replied 7 years ago.
I'll attempt to get it to you by tomorrow.
Customer: replied 7 years ago.
Thanks.
Jeannie
Expert:  Steven, M.Acc. replied 7 years ago.
I have Question 1 completed. Question 2 is missing some information, like a table of budgeted units to be produced.
Customer: replied 7 years ago.

This is what I have.
Thanks again
Jeannie
2. It takes 3 pounds of direct materials to produce the Regular product and 5 pounds of direct materials to produce the Deluxe product. It is the company's policy to maintain an inventory of direct materials on hand at the end of each month equal to 30% of the next month's production needs for the Regular product and 20% of the next month's production needs for the Deluxe product. Direct materials inventory on hand at June 30 were 9,000 pounds for the Regular product and 15,000 pounds for the Deluxe product. The cost per pound of materials is \$5 Regular and \$7 Deluxe. (25 points)

Instructions
Prepare separate direct materials budgets for each product for the third quarter of 2010.

Expert:  Steven, M.Acc. replied 7 years ago.
I also have Question 3 completed. I'm sorry, but Question 2 doesn't have enough information to complete it. For example, where it says, "It is the company's policy to maintain an inventory of direct materials on hand at the end of each month equal to 30% of the next month's production needs for the Regular product and 20% of the next month's production needs for the Deluxe product," how are we to know what next month's production needs are without a table listing them?

Would you like me to complete the remaining problems anyway?
Expert:  Steven, M.Acc. replied 7 years ago.
I've completed Questions 1, 3, 4, and 5. Please let me know whether you would still like the answers. If you wish, I can post them and answer Question 2 for you if/when you receive additional information.

Edited by Steven S. on 3/2/2010 at 8:48 PM EST
Customer: replied 7 years ago.
Ok...and lets make up some assumptions for question 2? Thanks

Customer: replied 7 years ago.
Wait I just got the information....hooray.
Jeannie
Expert:  Steven, M.Acc. replied 7 years ago.
I believe I found this additional Question 2 information and I've completed it. Please let me know if you're still interested in my answers. Thanks!

Edited by Steven S. on 3/3/2010 at 1:23 AM EST
Customer: replied 7 years ago.